Cheniere Energy brought in two heavy hitters during the last week to help target liquefied natural gas (LNG) suppliers worldwide for about 5.9 Bcf/d of LNG sendout capacity that Cheniere plans to manage at its three 100%-owned import terminals along the Gulf Coast.
On Friday, the company said it engaged former U.S. Energy Secretary Spencer Abraham's international consulting firm, The Abraham Group, to provide strategic advice and assistance on current and future LNG transactions. The Washington, DC-based Abraham Group assists clients seeking opportunities in the international energy sector. CEO Spencer Abraham served as U.S. Secretary of Energy from 2001 to 2005 and as a U.S. Senator from 1995 to 2001.
The hiring of Abraham to help plot a supply strategy came a day after Cheniere said it would partner with Morgan Stanley to procure the LNG (see Daily GPI, Oct. 21). Cheniere LNG Trading & Marketing Inc. and Morgan Stanley Capital Group Inc. said Thursday they will work cooperatively in negotiating with global suppliers to deliver supplies through Cheniere's proposed import terminals in Sabine Pass, LA; Corpus Christi, TX; and Cameron, LA (Creole Trail).
The three terminals will have a total sendout capacity of 9.9 Bcf/d (excluding the 1.5 Bcf/d Freeport LNG terminal, in which Cheniere has a 30% stake). Cheniere intends to hold onto a large portion of that space, marketing it in three ways: terminal use agreements (up to 4 Bcf/d), long-term supply contracts (2-3 Bcf/d) and short-term spot agreements (any remainder).
A portion of the capacity at the Sabine Pass facility (2.6 Bcf/d initially and a total of 4 Bcf/d by 2011) has been sold, including 0.7 Bcf/d to Chevron with an option for 0.3 Bcf/d of additional capacity, and 1 Bcf/d to Total. However, substantial capacity remains. Sabine Pass is already under construction and expected to be in service in January 2008. Corpus Christ (2.6 Bcf/d), meanwhile, is expected to be in service in November 2008. The massive 3.3 Bcf/d Creole Trail terminal is expected to enter service in November 2009.
Clearly Cheniere has its work cut out for it when it comes to attracting LNG supply, particularly given the current tight market for liquefaction. But spokesman David Castaneda said the company is expecting a lot of LNG to become available in the next five years.
"If you look at the global picture last year or even this year [liquefaction is in short supply]," Castaneda admitted. "But if you look at the global picture in 2008 or 2010, we will be long gas going into those periods. You will have gone from 17 Bcf/d of liquefaction globally in 2003 to 30 Bcf/d in 2008 and 41 Bcf/d in 2010... The great majority of that is destined to the U.S. market.
"By 2009 there will be 309 LNG ships in the fleet," said Castaneda. "That's up from 150 two years ago. We will have doubled the shipping capacity in a five-year period."
Cheniere recently announced an LNG supply request for proposals through what it calls its North American LNG Gateway Program. Through the RFP, Cheniere hopes to acquire up to 200 cargoes per year of LNG for the years 2008-2010. Cheniere said its Gateway program will provide global LNG suppliers a "direct platform to nominate cargoes into Cheniere's LNG receiving terminals starting with Sabine Pass." Cheniere LNG Trading and Marketing, Inc. will serve as purchaser of the LNG and as marketer of the natural gas to a pool of North American buyers.
Keith Meyer, president of Cheniere LNG Marketing, said the program will promote "Cheniere's goal of fostering the marriage between North American demand and global LNG supply. It provides a new channel for LNG suppliers to access the North American market and a means for North American natural gas buyers to proactively pull abundant supplies of LNG into the domestic market to alleviate a growing supply shortfall. We believe that over the next decade LNG will represent 20-25% of U.S. natural gas supply."
Cheniere said its Gateway program will accommodate both ex-ship and FOB basis ship-by-ship sales, as well as term transactions for a period of up to three years.
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